SFIO Alone to Probe Economic Offences

As per provisions of new Companies Bill, all ongoing investigations have to be transferred to Serious Fraud Investigation Office

The soon to be introduced Companies Bill will make the Serious Fraud Investigation Office the leading probe agency for economic offences, streamlining inquiries into corporate irregularities and catapulting the now toothless body to one with over-riding powers. Although set up nine years ago, the Serious Fraud Investigation Office (SFIO) remains handicapped due to insufficient powers of arrest. The proposed legislation will bar any other investigating agency of the central or state government from proceeding with any inquiry with respect to violation of the Companies Act. Further, all ongoing probes by other agencies will have to be transferred to the SFIO, which will have absolute powers over other agencies such as the police, the CBI and the enforcement directorate in this sphere. As was seen in the Reebok case, investigations were being held simultaneously by the SFIO, the Gurgaon police and private forensic teams. The new provision will streamline this and help fast-track probes by bringing it under one roof, said an official of the ministry of corporate affairs, the nodal ministry under which the SFIO operates. The proposal comes at a time when economic frauds are becoming increasingly sophisticated and difficult to detect. Although the SFIOs analysis of the alleged fraud at sportswear major Reebok is awaited, preliminary reports suggest that its estimate of the accounting scam is vastly different from that of the Gurgaon police, which has pegged it at.11.3 crore. In contrast, the SFIO has so far estimated it at euro 125 million, or about.850 crore. While penal offences will continue to be probed by the police or other concerned agencies, economic offences will no longer be sent to the economic wings of such agencies and instead be restricted to the SFIO, the official said. This provision is in addition to the recommendations of the Standing Committee on Finance that all charges framed by the SFIO be treated on a par with those filed by a police officer and that the agency be given statutory status and powers to arrest offenders. The SFIO has so far dealt with 49 cases of economic fraud. Companies Bill,2011 seeks to reform the institution of SFIO with the intent to strengthen the investigation mechanism by giving it a statutory status and other prescribed powers, said Pavan Kumar Vijay, managing director of Corporate Professionals Group, a Delhi based consultancy. The power of arrest will not only allow them to be taken seriously but also help prevent destruction of evidences by the accused. The Bill also recognises fraud as a cognizable offence, making granting of bail difficult. There are times when we have called a person for interrogation but the person got up and left and there is very little we could have done. Hopefully, the Bill will address these issues, a top SFIO official said. The investigation body has also been plagued by lack of designated officers who have an understanding of audits and accounts. All officers come to the SFIO on deputation and have little or no domain knowledge. By the time they pick up the necessary skills, it is time to get transferred. This hampers the functioning of the agency, the official added. The Bill, though largely silent on deputation, mentions that directors and experts from the fields including banking, taxation, forensic audit, capital markets and law will be appointed. For this to be possible, the investigating officer should be the one who can understand the purpose of the inspection, whether it is mere advertence or is it done with malafide intent. Such an officer should be able to track the whole transaction and realize the real intention. This is one long-term solution to such problems, Vijay added.


Economic Times, New Delhi, 12-12-2012

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